Biodiesel production company First In Spec (FIS) Biofuels has issued an initial public stock offering (IPO) to raise funds for the first of its three waste vegetable oil (WVO) biodiesel refineries in South Africa.
The IPO to finance the first refinery, which will cost about R350-million, opened on July 29 and will close on October 28. The company, which will provide $6,3 million in equity, is seek- ing finance for the project through the issuing of ten-million unlisted ordinary shares of 0,01 c each in FIS Biofuels at an issue price of R5 a share. The funds raised will be used for environ- mental-impact assessments (EIAs), refundable deposits on the properties earmarked, as well as additional working capital.
As fossil fuels near depletion, biofuels have increasingly become the dominant energy preference internationally. There is a growing demand for biodiesel that can be blended by the major fuel companies.
“There has been a global shift towards the use of biodiesel. The production of biodiesel has increased by 300% worldwide over the last six years. It is expected that between now and 2030, the worldwide consumption of fuels for transportation will increase rapidly. About 680-million litres of fuel will be required additionally each year. The biofuels market, which will be able to cover about one-third of this additional requirement, offers great potential,” says FIS Biofuels MD Louis Nyiri.
The company reports that biodiesel is infinitely renewable and provides better lubrication in comparison with normal diesel, extending engine life by up to 200%. “In fact, 1% of biodiesel added to normal diesel will increase lubricity by 65%. The main effect of this is that it acts like a solvent to clean engines. Performance has been shown to rate compar- ably with petroleum diesel in respect of power, efficiency, hauling and climbing, and it burns 75% cleaner than fossil fuel diesel,” he says.
The pilot project, which is likely to be situated in Richards Bay, in KwaZulu-Natal, will produce 50-million litres a year of commercial biodiesel from WVO. “Once the funding has been raised, construction on the project will begin, with first production expected by the first quarter of 2011,” he adds.
The company has identified three prospective sites for the project, one in Springfield Park, in Durban and two in Richards Bay. The sites have been zoned for industrial use, but the larger of the two Richards Bay proper- ties, Nyiri reports, is the preferred property. This is because of its close proximity to the harbour, as well as to the railway lines leading to Gauteng and Durban.
“Being close to the railway lines would allow us to offload the feedstock directly into the company’s storage tanks that will be established on the property and allow for the biodiesel to be put on rail directly from the factory,” says Nyiri.
FIS Biofuels is working closely with a number of government and financial institutions. The venture is being initiated with guidance from the Department of Energy (DoE) and the South African Revenue Service (Sars) in line with the relevant legislation. He adds that the company has received positive feedback from all fuel companies in South Africa regarding future potential for blending with fossil fuel, as well as the mining, agriculture, fishing and forestry industries, which will gain a 50% rebate.
The project will involve the establishment of a fully automated and computerised biodiesel plant that will produce biodiesel using waste vegetable oil, which is unsuitable and highly carcinogenic for human consumption and is earmarked for landfill sites, or bleached and then resold into the rural communities as refined oil.
Nyiri reports that the plant, which will be manufactured in Italy, by biofuels plant producer Desmet Ballestra, and shipped to South Africa and erected on site, together with the required infrastructure of storage tanks, piping and roads, will be fully automated and computerised and will run continuously 24 hours a day, three shifts a day.
FIS Biofuels has obtained signed letters of intent for feedstock supply and has secured about 15-million litres of WVO a month. The company only requires 4,2-milllion litres a month.
FIS Biofuels has formed a strong relation- ship with Desmet Ballestra. In more than 40 years, Desmet Ballestra and its 15 affi- liated companies have installed over 400 oleochemical and biodiesel processes worldwide and it was recently awarded 13 contracts for biodiesel plants in Colombia, Estonia, France, Greece, India, Malaysia, Peru, the Netherlands, Portugal, Spain and the US, with capacities of between 100 000 t/y and 250 000 t/y using the latest technologies based on rapeseed, soya bean, sunflower, palm oil or animal fats.
Nyiri notes that FIS Biofuels has successfully completed the commissioning of a feasibility study and business plan from the Institute of Strategy & Complexity Management, in New York, identified potential suppliers of waste vegetable oil, both in South Africa and abroad, and obtained letters of intent from potential suppliers.
He adds that discussions with the DoE and Sars and negotiations with Desmet Ballestra for the supply of the biodiesel plant and the supply of the infrastructure from BCS Holdings are advanced. The marketing of the biodiesel and glycerol to be produced by the company is ongoing, as is the commissioning of EIAs, which will be carried out by global environmental consultancy firm WSP Environment & Energy.
The second phase of the project will start once the R50-million is successfully raised and will consist of the continuation of the EIAs, the securing of the properties and the securing of contracts for the supply of WVO and identifying a broad-based black economic- empowerment consortium as a partner.
The third phase will start once the second phase is fully subscribed and further funding of about R300-million has been raised. During this phase, contracts for the supply of biodiesel and glycerol will be secured. The plant will be shipped to South Africa and the EIA will be completed. A tank farm, piping, roads and utilities will be constructed for the arrival and erection of the plant.
The fourth and final phase of the project will include the arrival and erection of the plant and its infrastructure in South Africa, as well as the commissioning of the biodiesel plant, the arrival and storage in storage tanks on the property of the first batch of feedstock and the employment of engineers and skilled and semi- skilled workers to run the plant.
“This project is historic as the South African government is a signatory member of the Kyoto Protocol, that stipulates that there should be a 200-million-litre blend in our country’s fossil fuel system by 2013. Currently, there is no blend at all and this project will put South Africa on the map,” concludes Nyiri.